“Data-Driven Thinking” is written by members of the media community and contains fresh ideas on the digital revolution in media.
Today’s column is written by Lewis Rothkopf, general manager of media and growth channels at MediaMath.
The legacy media supply chain is a mess, and marketers are fed up with it. Years of nontransparent practices up and down the media supply chain, which originated when buying from opaque ad networks was de rigueur, have taken their toll on the industry.
The supply chain is not just convoluted and prone to abuse – there’s much value being sucked out by those who just don’t need to be there. These same middlemen bring auction pricing challenges that need to be carefully and manually managed. Then, there’s often more than one aggregator in the mix who adds no value but introduces fraud risk and the need for third-party verification vendors.
The publisher starts from a standpoint of not knowing much – or anything – about the shape of the incoming demand. What are the marketer’s objectives? What is the most suitable ad environment for the message to be successful? And the ancient tech underpinning this whole thing – ad tags – are low-power, low-security, high-latency and easily co-opted by bad actors.
Frustratingly, fraud remains a meaningful problem in virtually all digital advertising channels, largely due to the historically low cost of perpetrating the crime. Fraudsters constantly try new ways to separate marketers from their money, including geotargeting fraud, wherein bots simulate presence in one or more high-value DMAs to tap the richest veins of demand. Location and other types of fraud will only grow as new channels and marketing tactics emerge.
The ad tech (non)tax
Unlike actual taxes, which are mandatory, no one would imprison a marketer for not using the services of one or more vendors. Indeed, if marketers want to buy media from publishers, with no intermediaries involved, they are generally free to do so: They can pick up the phone, negotiate a rate and mail a check to the publisher.
But they also need to be prepared to:
- Pay more than necessary for media, because they lack the aggregate buying power of an agency or demand-side platform (DSP)
- Accept without recourse any fraudulent impressions, nonhuman traffic or brand-safety issues that arise
- Be responsible for any counting discrepancies between marketers and publishers
- Actively monitor campaign performance and hygiene, with dozens of disparate nonstandardized reports from publishers
- Hope that a critical mass of their target audiences is organically present to see their ads on the publishers’ sites or apps
- Independently measure the campaign’s success at converting consumers or influencing perceptions
- Pay in advance or promptly within 30 calendar days via automatic charge or consistent commitment
There are significant costs involved in making media transactions possible, safe, efficient and performant. But the current paradigm, in which publishers too often receive 20-45% of spend and much of the rest goes to intermediaries that don't add value, is both unacceptable and unsustainable and has a deleterious effect on marketing spend and trust.
How much of a marketer’s dollar should reach publishers?
Marketers are right to insist that their suppliers provide transparency into their media procurement practices and eliminate players that add no value or do not align with their principles. But to consider only those dollars that have reached the media property owner to be working media is dangerous and self-defeating. The question marketers should instead ask: “Is our media working for us?”
Consider an out-of-home advertiser that wants to launch a massive advertising campaign on billboards across America. It's going to cost $100 to lease all the billboards. Everything else will cost $300, including designing the creative, hiring painters to paint the billboards and updating them throughout the campaign. Would the marketer conclude that 25% of the spend went to working media and the rest was a tax? Definitely not.
It is tantalizing to imagine that the executional science to make marketing safe, performant and effective is free. That is simply not true. By artificially limiting their success via the working-media thought trap, without the necessary context of the ingredients that make the media work, marketers risk leaving money on the table and their best consumers wanting more.
Where do we go from here?
Marketers have the right to understand how their money is spent. They deserve to know what media or data they are buying and pay a fair price for it. They should work with suppliers and counterparties that respect this principle and enforce it up and down their own value chains.
Marketers should be wary of those who claim to add value without providing evidence. And they should discuss with their service providers how they and their downstream suppliers make money.
Marketers should not fall victim to the logical fallacy that says working media means the percentage of the marketing dollar that reaches the media property. Instead, they should maintain a sharp focus on driving real, measurable business outcomes, which can’t be faked, gamed or easily defrauded.